‘Giant Unlock’ Causes Optimism’s OP Token Value to Drop

OP holders might not be feeling very optimistic with the rollup’s token unlock schedule now in effect

article-image

Praveen Nanu/Shutterstock modified by Blockworks

share

The law of supply and demand is a fairly simple concept: Increasing supply in relation to demand will usually cause prices to fall.

Anyone who understands this basic economic law shouldn’t be surprised that the unlocking of tokens — roughly equivalent to 114% of Optimism‘s previous circulating supply of its OP token — correlated with a steady decline of nearly 50% in the token’s value over recent weeks. 

Despite this market negativity, the convergence of a number of developments that are building on the OP stack signals a positive outlook for the ambitious Ethereum layer-2 solution.

The “giant unlock” of supply caused Optimism’s OP token to “dump roughly 17% over the past few days,” says Ryan West, a Blockworks Research analyst, on the 0xResearch podcast.

And it’s only the beginning, he says, with tokens continuing to unlock half a percent of the total supply every month until some time in 2027.

It was a “pretty bad trading week for OP,” he observes.

The analyst wonders if a number of upcoming events such as the impending Bedrock upgrade, which enables Ethereum to “eventually become a Superchain” will be enough to maintain positivity. 

“Is this enough to cause a bounce after the unlock,” West asks, “or will the overhangs over time also be a little too much, as liquidity is pretty dry at the moment?”

Optimism’s price detached from its market cap as the unlock hit

Building on Optimism

The Bedrock upgrade enables chains to build on top of the OP stack and create a single unified network that incorporates “bridging, governance, upgrades and cross-chain communication.” The mainnet upgrade is scheduled to take place on June 6.

Other upcoming projects building on the OP stack, such as Worldcoin and Coinbase’s Base testnet, also appear to be nicely timed to maintain positive vibes, despite the scheduled release of tokens. 

Worldcoin will provide the ability to verify “humanness” via a “decentralized, open-source and privacy-preserving” protocol, according to co-founder, Alex Blania. 

Coinbase, the largest American crypto exchange, is building the layer-2 chain, Base on Optimism. It aims to offer a “secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralized apps or ‘dapps’ onchain,” according to the company website.

The market is inefficient

Blockworks research analyst Ren Yu Kong notes that historically, teams have often deliberately timed protocol upgrades to coincide with token unlocks in order to mitigate suppressive effects on the market. 

“In crypto, these large unlocks,” Kong says, “it means everyone can dump early. But I feel like that’s mostly a function of the market not being efficient and pricing everything too highly.”

Research analyst Sam Martin adds that he expects that with the growth of projects attached to Optimism, conditions may “shape out” more like the Cosmos ecosystem, where “the hub isn’t necessarily the central value accrual token.”

Token value could hinge on whether the OP stack chain returns revenue from the sequencer back to public goods funding, Martin says. 

“That is a pretty enticing flywheel right there if it becomes a standard.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million